Let's Talk About Royalties: The Continued Uncertainty Surrounding the Creation and Legal Status of the Overriding Royalty

Abstract

The oil and gas and mining industries developed the practice of creating royalties that would run with the land. This led to the Supreme Court of Canada’s decision in Bank of Montreal v. Dynex Petroleum Ltd. Despite the decision in Dynex recognizing a new property right and changing the common law, the law remained unsettled until the Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc. and Manitok Energy Inc (Re) decisions apparently simplified the concept of royalties as property interests. In this article, the authors explore the overriding royalty, its common law evolution, the uncertainties surrounding its proper legal characterization, the implications of such legal uncertainty, and the shift the Dianor and Manitok decisions represent, while considering the nature of the interests that royalties represent, the manner in which industry has attempted to protect those interests, and the efficacy of such attempts.